European finance officials have discussed as a worst-case scenario limiting the size of withdrawals from ATM machines, imposing border checks and introducing capital controls in at least Greece should Athens decide to leave the euro.

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As well as limiting cash withdrawals and imposing capital controls, they have discussed the possibility of suspending the Schengen agreement, which allows for visa-free travel among 26 countries, including most of the European Union."Contingency planning is underway for a scenario under which Greece leaves," one of the sources, who has been involved in the conference calls, said. "Limited cash withdrawals from ATMs and limited movement of capital have been considered and analysed."Another source confirmed the discussions, including that the suspension of Schengen was among the options raised."These are not political discussions, these are discussions among finance experts who need to be prepared for any eventuality," the second source said. "It is sensible planning, that is all, planning for the worst-case scenario."

Rather impressively, the botched bailout of Spain's banks wasn't even the most incompetent thing Europe's officials did on Monday. That honor goes to the guys who admitted that they have talked about instituting capital controls if Greece actually does exit the euro zone. Meaning: Europe will prevent people from moving their money across national borders -- and perhaps even from withdrawing it from ATMs -- if eurogeddon hits.

The first rule of capital controls is: Don't talk about capital controls. The second rule of capital controls is: Just do them -- secretly. Talking about them beforehand only broadcasts to everyone in Europe's periphery that they should move their money to a German bank ASAP, as otherwise their euros could soon turn into pesetas or lira. Of course, if people start pulling their money out of their home banks en masse, the only solution might be capital controls ...

In other words, talking about capital controls can set off a continental bank run that makes capital controls necessary....